First Data Tightens the Link Between Digital Deals and Payments

First Data Corp. is entering the fray of technology vendors offering merchants and retail banks the ability to issue digital deals.

As businesses try to transition in a digital world, the Atlanta processor hopes that its foothold in payments will put it ahead of its competitors, which are already offering similar products to retailers and financial services companies.

First Data executives say its software gives merchants and issuers an insight into their customers' spending habits with real-time reports that determine which deals are the most popular.

First Data's system, called OfferWise, is designed to be more transparent than rival services. Many digital coupon systems are invisible during the transaction — the discount is posted to the user's account after the fact.

But because First Data also processes the transaction, its software gives retailers the ability to electronically guarantee discounts at the point of sale. A confirmation of the coupon is printed on the receipt.

"We would go ahead and take that 20% off before we went through with the transaction," says Sarah Owen, First Data's vice president in charge of personalized marketing and loyalty. "So the receipt would say that the initial purchase was $100 and it was discounted by $20."

To use OfferWise, a consumer begins by entering credit card account details into an online form. After that, the cardholder can go to a participating merchant and instantly redeem an offer by making a payment with the same card.

The system resembles one from Cardlytics Inc., which is also provides digital coupons. Cardlytics has about 200 customers, including PNC Financial Services Group Inc. and Regions Financial Corp.

As of January, Bank of America Corp. said it is working with Cardlytics to test a similar online rewards system called BankAmeriDeals.

American Express Co. is taking a similar approach with a program that allows Twitter users to receive rewards based on words used in the messages they post with the microblogging service.

"There is definitely a lot of interest and a lot of activity in this space," says Dom Morea, First Data's senior vice president and division manager of advanced solutions and innovations.

First Data's system is meant to break down the hurdles inherent in most coupon redemption systems, Morea says.

"If I am using an app, or if I'm at home, or I'm moving around shopping … the expectation, at some point, is that all of this just sort of works seamlessly," Morea says.

First Data, however, is trying to separate itself from the pack.

Already, WhaleShark Media Inc. of Austin is using the technology to market rewards on its online couponing website, RetailMeNot.com. First Data executives say they have not yet announced any banks as customers.

First Data, a unit of the Kohlberg Kravis Roberts & Co. private-equity firm, is also working with software developer CardSpring to offer third-party programmers a way to customize the platform. First Data also plans to make the system available through other processors.

"That the way we have built this really allows for all kinds of applications," says Owen. "I think you are going to see a lot of innovation in this space."